OVERVIEW

After a few weeks of gains for the ZAR, the currency market was rather flat this week as the Rand struggled to push further than R14.50/$. Market players have started favouring the USD after Fed minutes released on Wednesday showed a possibility of aggressive rate hikes to come, with their next meeting being in May.

The Dollar has been gaining back its losses against the rand and other currencies after Wednesday this week. Dollar strength comes after the Fed’s minutes of their last meeting which indicated that the Fed will act more aggressively in the future, giving hopes to investors on higher returns from America.

The U.S released their weekly jobless claims yesterday, which fell by 5,000 to 166,000. This brings the weekly jobless claims back to a 53-year low and points to the U.S actively combatting unemployment in the country. However, it is apparent that a tighter labour market will automatically lead to elevated inflation which the Fed is currently battling to tame.
We anticipate that the greenback will continue to gain for the next few weeks as markets settle on the idea of an aggressive stance from the Fed and further monetary policy tightening.
With the U.S Dollar now catching the markets eye, commodity gains have slowed down. However, Gold is still fairing pretty well in the markets trading around $1,930 per ounce this morning.

Shanghai, China remains in lockdown and fear has been growing amongst importers as well as investors. We understand this has been placing pressure locally on our clients as well with delivery times now having to be extended with their customers. With Shanghai being China’s financial hub having to shut down production, the global economy will suffer as well importing and exporting delays.

Technically:

The USD/ZAR has been trading in small ranges daily but noticeably in a short term upward trend. The markets remain fragile and the Rand will continue receiving its direction from USD traders as the greenback is currently backed by a hawkish (aggressive) tone from the Fed. The USD/ZAR pair can be seen trading within the ranges of R14.60/$- R15.03/$ in the coming week

The EUR remains softer against other currencies, currently trading at R16.03 and this has been since the start of the Russian invasion of Ukraine.

The minutes of the last ECB meeting indicated that the central bank will be coming in full force and aggressive should need be. Inflation continues to sky rocket and the economy remains stagnant. It is expected that the ECB will hike rates in the third quarter to combat the worldwide pandemic of inflation and help the economy recover from the Russian invasion in Ukraine.

In other news, the Russian Ruble is seen to be making a comeback and has soared to pre-invasion levels. Despite sanctions against Russia, the Ruble is just as persistent as the President of Russia proving that currency is stronger than we think. We can assume that the Ruble is backed by the high demand for oil and the fact that Putin requested for the commodity to be bought in Rubles from Russia.

Technically:

The Euro remains fragile against a basket of currencies including the Rand. The EU has been under alot of pressure due to oil supply and demand. We can see the EUR/ZAR pair trade within the ranges of R15./95€ – R16.31/€, levels which were last seen in 2020.

The GBP has caught up to its losses faster than the USD and the EUR. There has not been much happening in the UK, however, economists slashed the countries economic growth forecasts on the basis that the household disposable income will fall to the lowest it has seen in decades.

Economists said that the GDP in the UK could now be anticipated to come in at 3.8% this year, revised down from projections of 4.5% prior to the Russian invasion of Ukraine. Inflation in the UK still calls for concern and is estimated to reach a peak of 8.4% in the second quarter. The UK has evidently been negatively affected by the Ukraine invasion and is said not to be facing a growth crises but indeed an inflation crises.

Technically:

The GBP has desperately been trying to make its way back up and has being doing well against other currencies. We can see markets favour the UK currency as positive sentiment increases. The GBP/ZAR pair could be expected to trade within the ranges of R19.06/£ to R19.55/£ in the coming week.

Technical levels we are watching for the coming week: